Politicians blind to tough realities in energy

Long term planning is essential in energy supply, but politicians of all colours seem content to promise certain things while ignoring difficult issues critical for the private sector to plan and invest to make those promises a reality.

It’s understandable, I guess, that the more we struggle with sorting out present-day difficulties, including those of energy supply, the more attractive long-term projections for a different world become.

In electricity supply in Australia, the federal government and others are attracted to looking at 2049-2050. 

To appreciate how big an ask this is, just go back to 1977 – 36 years ago.

Standing there, please predict that Australia will have an export industry from its east coast in coal seam gas by today or that the Americans will have their “shale revolution"?

The list of other things that shape today’s world and were unforeseen in the late 1970s is a long one.

Does it matter?

Well, yes, because the real point of the current crop of long-term projections, especially in electricity, is to bolster arguments for changing today’s policies.

However, this approach is a wholly one-sided perspective. 

In Australia, for example, it is simply not on to discuss our mid-century power prospects and include nuclear energy. On the other hand, it is increasingly politically correct to worry about our coal exports as a "carbon bomb".

The federal government’s Bureau of Resources and Energy Economics is happy enough to put out a new set of projections that assert by 2050 wind power, solar power and geothermal energy will be almost level-pegging with black coal and gas in Australia’s power station mix.

Only in Australia could we have a conversation about the nation’s future energy needs in a carbon-constrained world without serious consideration of nuclear energy.

Sure, we won’t have nuclear reactors producing our electrons in 2020 and probably not in 2025. But, if our concerns over global warming continue to ratchet higher, will we still not have any in 2030? 

And if we do change our minds and start embracing nuclear energy locally, how many reactors could we have in 2050? 

At least Martin Ferguson’s energy white paper canvassed the possibility when it was published late last year – even if it then consigned the technology to the too-hard basket (politically).

But BREE, which reports to Ferguson, is content to see a long-term future without any prospect of the technology even while it somewhat weakly embraces the hypothesis that there will finally be a breakthrough in carbon capture and storage, enabling ongoing use of coal and gas.

Nuclear advocates, of course, will tell us that CCS is already dead in the water – a claim that, also, may turn out to be well wide of the mark. 

That the next steps in this technology are proving hard to finance is true. Much the same, for example, could be said of geothermal energy right now.

But it is a courageous (compare Yes, Minister) predictor who can make strong assertions that neither will be a usable technology here in 2050.

The point is that, as investors in both coal seam gas and shale oil and gas are demonstrating to the wonderment of the energy world, technology developments can change things – and do so dramatically.

As we move messily towards a change of regime in Canberra later this year, energy may seem a second-tier issue – unless you are a Coalition type using the New South Wales corruption in coal leases deal to tar the Labor Party as a whole – yet it isn’t, in the short term, medium term or long term.

In the short term, the problem of electricity and gas prices and their impact on manufacturing is not about to go away. The odds are on it not getting better any time soon.

In the medium term, energy security may become a matter for far more serious attention than at any time since the late 1970s, not least because we turned this decade into a lost opportunity.

In the longer term, the need to decarbonise our economy – which would include using CCS to enable continuing power generation from coal and gas as well as nuclear and more renewable energy – is seemingly inescapable.

At a federal level, the Coalition has demonstrated its willingness to play politics with energy issues, but it has yet to show its hand, except for promising to kill the carbon tax, in terms of sustainable, investment-attracting policy.

Politicians, of course, see things differently in an election year: the only game in town is creating a winning strategy.

Investors, on the other hand, are near-desperate for the Coalition to articulate its energy plans.

For them, the alternative is not only the loss of 2013 for meaningful planning but also perhaps 2014 as a new government rambles its way towards a settled policy – by which stage the next federal election is rearing above the horizon and elections in New South Wales and Queensland are casting their shadows across the energy landscape.

The growing fear among them, too, is that this is a lost decade.

“It can’t go on like this,” a senior figure in the energy industry said to me last week. “Why not?” I retorted.

The national interest should dictate that we already – and certainly well before September – have a clear view of the Coalition’s alternative energy plan for this decade. 

I am just not going to hold my breath waiting for it.

Keith Orchison, director of consultancy Coolibah Pty Ltd and editor of Powering Australia

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